| APRA takes tough stand on securitisation |
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| Thursday, 02 September 2010 00:00 |
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Source: Broker News The fledgling promise of increased competition from mid-tier and small lenders is under threat from Australia's bank regulator, which found some banks have been "inappropriately" understating their risk to securitisation. The Australian Prudential Regulation Authority has taken a tough stand on securitisation, after a review on the market revealed lenders could be exposed to risky loans. APRA rejected lenders' claims that the high interest charged on risky loans and mortgage insurance should be enough to protect against losses. The regulator also warned banks that it would not "take a favourable" approach to lenders that made bilateral agreements to buy the riskier tranche of securitisations from one another. The review could mean a slowdown in securitisation as lenders work to increase the level of capital needed to hold against RMBS transactions.
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